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Estimate of equity beta for arkansas lighting company

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Arkansas Lighting Company (ALC) is a private company and would like to estimate an equity beta for their firm, even though their common stock is not traded publicly. Fortunately, they have found a similar peer company, Oklahoma Lighting Company (OLC), that is about the same size and manufactures a similar product line. They have calculated an equity beta of 2.08 for OLC. An analyst has collected the following data for the two companies:

                                              ALC       OLC

Book Value of Debt       4 Million  3 Million

Book Value of Equity      3 Million   4 Million

Market Value of Debt      4 Million   3 Million

Market Value of Equity     6 Million   7 Million

YTM on Debt              8%       7%

Tax Rate                 25%      30%

Equity Beta                  ?        2.08

What would be an appropriate estimate of the equity beta for the Arkansas Lighting Company?

Reference no: EM132477780

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